Supreme Court Sets Aside Debarment and Penalty Orders Against Appellant in a Contract Dispute
New Delhi, April 18, 2023 – The Supreme Court of India, in a recent decision, set aside the debarment and penalty orders issued against the appellant by the High Court, in relation to a contract dispute over the supply of transformers. The Court held that the imposition of penalty could not be approved, and the debarment order was issued without due regard to the undeniable factual situation.
The dispute arose from the appellant’s alleged failure to fulfill the supply of transformers as per the contract terms, which led to the respondents issuing debarment and penalty orders against the appellant. In response, the appellant approached the High Court, which disposed of the writ petition by maintaining the order of blacklisting and debarment, only modifying the period of debarment to start from an earlier date. The appellant then filed a review petition in the High Court, which was summarily rejected. Subsequently, the appellant approached the Supreme Court.
Upon examining the case, the Supreme Court identified two major factors that made the imposition of penalty unapproved: the lack of specific notice regarding the proposed imposition of penalty and the maximum penalty imposed without specifying the reasons for such a decision. The Court set aside the impugned order dated 17.08.2020 due to these factors.
The Supreme Court also found shortcomings in the order debarring the appellant for a period of 3 years. It noted that the appellant had made substantial supplies against the purchase orders and that the respondents had deferred the supply without giving further instructions to resume supplies. The Court set aside the impugned order dated 30.07.2020 debarring the appellant.
The High Court had the opportunity to correct the errors in its order but chose to dismiss the review petition without considering the relevant factors. As a result, the Supreme Court set aside the impugned orders dated 23.04.2021 and 13.12.2021 and allowed the writ petition filed by the appellant. The orders dated 30.07.2020 and 17.08.2020 were quashed and set aside.
The Supreme Court annulled the debarment for all practical purposes and ordered that the order dated 30.07.2020 shall not operate against the appellant’s rights and interests in any future tender process. The penalty imposed by the order dated 17.08.2020 was set aside, and if any amount had been recovered, it should be refunded to the appellant within a month with a 9% per annum interest rate from the date of recovery until the date of repayment. The parties were to bear their own costs.
This decision by the Supreme Court reiterates the importance of natural justice and adherence to the terms of a contract while examining disputes arising from alleged breaches.
ISOLATORS AND ISOLATORS THROUGH ITS PROPRIETOR MRS. SANDHYA MISHRA
VS
MADHYA PRADESH MADHYA KSHETRA VIDYUT VITRAN CO. LTD. & ANR.
